Cryptocurrency entry and hidden trade cost: understanding of gas committees

Cryptocurrencies have revolutionized the way of thinking about money, security and online transactions. From Bitcoin to Ethereum, these digital currencies attracted the attention of investors, entrepreneurs and everyday users around the world. However, the aspect, which has attracted significant attention in recent years, is a key element of the cryptocurrency ecosystem: gas commissions.

Gas committees are fees charged by blockchain networks in each transaction, regardless of whether it is payment or leaves. They serve as a payment for miners to confirm the transaction and check the integrity of the network. While the cryptocurrency concept may seem intuitive at first glance, understanding how gas commissions are necessary for traders who intend to participate in this digital space.

What are gas taxes?

Gas committees are generally called the units of the native token of specific cryptocurrency, such as Ether (ETH) or Bitcoin (BTC). The commission is calculated on the basis of transactions’ complexity, including factors such as the size of the block, overloading of the network and the number of transactions involved. To give you an idea of ​​how significant gas commissions can be:

• In 2017, one transaction covering two Bitcoin and Ethereum transactions costs about $ 6 million.

• The average gas commission for Bitcoin in 2020 was about USD 2-3 per block, which is approximately equivalent to annual GDP countries such as Greece or Ireland.

Factors affecting gas taxes

Numerous factors contribute to the growing costs of negotiations in the field of cryptocurrency exchange. Some of these factors include:

• Block size : The size of each block determines how many transactions can be processed at the same time. With the increase in the size of the block, commissions are growing.

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• Simple transactions with several inputs and outputs are usually cheaper than complex ones.

• Block time : Time between the creation and verification of the block affects the frequency of the transaction. Fast blocking times include higher gas commissions.

consequences for traders

Gas committees can have a significant impact on traders, in particular those who are new in cryptocurrency markets or there is a lack of experience with decentralized exchanges (DEX). Here are some ways in which negotiations on the exchange of cryptocurrencies can be influenced:

• Reduced commercial volumes

  

  : High gas commissions may discourage users from participating in the market, which leads to a reduction in trade volume.

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• They can also use other expenses, such as withdrawal commissions and negotiating commissions.

limiting the impact of gas commissions

While gas commissions remain a serious problem for traders in cryptocurrency markets, there are ways to alleviate their influence:

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